4 Reasons Why Savers Fare Better Than Spenders

A penny saved is a penny earned. - Benjamin Franklin Chances are this saying, or something like it, has been pushed on you for most of your life. Some people ignore it, others live by it. For those who didn't save their money: Sorry, it looks like your mother may have been right. A recent online HSBC Direct survey suggests that active savers had an easier time weathering the recent financial storm. (For background reading, see Save Without Sacrifice.) What's even more telling is just how much better off the savers were. Of respondents who were active savers, 46% said that they felt comfortable with their financial situation and had not been forced to cut back their expenses. By contrast, 37% of non-savers said they'd had to scale back on their spending as a result of the recession. Clearly some people are managing their money more effectively than others. If that isn't enough to convince you of the importance of saving, here are four more reasons:

Less Risk The more you add to your net worth, the less risk you need to take with your money to accomplish the same goals. Consistent savers can take a more conservative approach to their investments, which results in fewer losses in market downturns. Those who save less or not at all either fail to achieve any financial goals or need to take on significant risk to do so. The increase in risk decreases their chances of success. (For more insight, see What's Your Net Worth Telling You?)

Consistent Lifestyle The cushion of having savings and needing less income than you actually spend allows you to continue your lifestyle throughout most economic conditions. Because the option of not saving for a short period of time or spending some savings exists in savers and doesn't exist in non-savers, the lifestyles of consistent savers will be impacted less than those who don't save and therefore have fewer options.

Added Security

The more you add to your net worth, the better you will feel about your financial situation. Consistent savers have less stress than those living closer to the edge and when unexpected events happen, they have the ability to move through them without major consequence. What may be more important is that savers know this and this provides a sense of security that no matter what happens, they will be alright. (Would you be able to weather financial disaster? Read Are You Living Too Close To The Edge? to find out.) Sense of Purpose Consistent savers have goals and work toward them. They know that they are financially better off saving to go on vacation than they are charging it on a credit card. They see saving as an ongoing part of their lives, rather than a means to an end. Reaping the benefits of this diligence tends to be a positive force for savers. This contrasts with the non-savers who, if they save at all, tend to do so out of fear rather than as a habit.

In the recession, savers were better prepared and were less impacted compared to non-savers. And because it's unlikely that this will be the last recession we see, if you aren't an active saver already, now might be the time to cultivate the habit.